Creating Supply Chain Excellence

The Tompkins International Blog

Alibaba IPO: Just Give Me the Facts

September 9, 2014

Alibaba IPO: Just Give Me the FactsBy Jim Tompkins
CEO, Tompkins International

I’ve been reading a lot of articles lately that toss around Alibaba IPO numbers. There are so many variables and this is really a big deal. (I have never tried to sell $20+ billion of stock—but it can’t be easy.) Given the many variables, I’d like to present the ranges I believe are reasonable for the Alibaba IPO, as well as the emotions and significance of these numbers (which is maybe even more important than the numbers).

Of course, I am not an employee of Alibaba, I don’t own stock in Alibaba, and I have never done consulting work for Alibaba. But I am a CEO of a supply chain consulting and implementation firm that does a lot of retail and consumer products consulting. I am student of Alibaba and I have conducted extensive research on the company, its founder Jack Ma, and its past, present, and future. Watch my video The Alibaba Effect to learn more about the Alibaba phenomenon.

Let’s look at the IPO share price and cash raised first. I believe the Alibaba IPO share price will be between $60-$70 and that the IPO cash raised will be between $20-$25 billion. To be the largest IPO ever in the world, Alibaba needs to raise more than the $22.1 billion that was raised by the Agriculture Bank of China, Ltd. in 2010. To be the largest in the U.S., Alibaba needs to raise more than $19.96 billion raised by Visa in 2008 (Facebook was only $16 billion in 2012). The Alibaba team will be conducting 100 meetings globally over the next ten days, and the result of these meetings will affect where Alibaba will land in these ranges.

I believe the valuation range for Alibaba’s IPO will be between $155-$170 billion. A fun side note: Amazon’s current valuation is $160 billion, and Alibaba may think it would be cool to be valued at more than Amazon. My view of today’s actual current valuation is $190-$220 billion. So why would Alibaba position its IPO at a valuation lower than the actual valuation? Good question. The reason is because Alibaba has unique IPO objectives. Alibaba is not going public to raise cash. Alibaba’s objectives are to:

  1. Increase its brand recognition as a result of the IPO. In turn, this will grow the participation of global companies on TMall, increase U.S. awareness of Alibaba, and position Alibaba as the leading global retail platform.
  2. Boost its momentum. Alibaba is very aware of poor publicity that befell the Facebook IPO due to the poor performance of its stock shortly after their IPO. This will not happen to Alibaba. Its goal is to see its stock price increase after the IPO by offering shares at their IPO at a conservative price, thus almost assuring significant gains going forward. This gives Alibaba the much desired momentum going into the 4th quarter.

Are you wondering if going with a conservative valuation makes Alibaba shares a good deal? Yes—I believe buying Alibaba stock is a very good deal. (But hey, that’s just me.)

More Resources

Article:  What’s Happening with Alibaba: Profits Soar as IPO Nears
Press Release:  The Alibaba Effect: What It Means for All U.S. Businesses and How They Need to Respond


Photo Credit: Photographer Andrew Harrer Bloomberg
Leave a comment

Top Highlights from the 2014 Supply Chain Leadership Forum

September 5, 2014

By Tompkins International Staff

Last week we hosted our 10th annual Supply Chain Leadership Forum! We had nearly 130 attendees join us in Nashville at the Hilton Downtown on August 25-27 for several days of networking, thought leadership, and knowledge sharing.

In case you missed it, here are some of our favorite photos from this year’s event:

Kick-Off Reception on Monday Evening

Attendees settled into the forum and networked with peers, and some sampled our signature event drink, The Tompkins Tea. A special thanks to JDA Software Group for sponsoring this reception.

Kick-Off Reception on Monday Evening

Kick-Off Reception on Monday Evening


Jim Tompkins’ Opening Keynote on ‘Responding to The Alibaba Effect’

Tompkins International CEO Jim Tompkins engaged the audience with his breakthrough keynote speech, ‘Responding to The Alibaba Effect’ (based on his blockbuster video The Alibaba Effect).

Jim Tompkins’ Opening Keynote on ‘Responding to The Alibaba Effect’

Jim Tompkins’ Opening Keynote on ‘Responding to The Alibaba Effect’


Dinner and Live Music at The Listening Room Café

After a packed day of breakout sessions, Jim Tompkins’ keynote, and a general session led by China expert Michael Zakkour, the group headed over to local music spot The Listening Room Café. We kicked off the evening with a cocktail hour.

Dinner and Live Music at The Listening Room Café

Dinner and Live Music at The Listening Room Café

Our attendees enjoyed a Southern-style dinner and live music by local band Amber’s Drive.

Southern-style dinner and live music by local band Amber’s Drive

Southern-style dinner and live music by local band Amber’s Drive

Southern-style dinner and live music by local band Amber’s Drive

Live music by local band Amber’s Drive


Women in Supply Chain – Breakfast

On Wednesday morning, some of the women of the forum gathered for a “Women in Supply Chain” breakfast to network with other women at the event and to discuss hot topics in the industry.

Women in Supply Chain – Breakfast

Women in Supply Chain – Breakfast


Closing Lunch and Learn Session

After two final breakout sessions on Wednesday, the group joined together one last time for a “Lunch and Learn” session led by Bruce Tompkins and Chris Ferrell. The Lunch and Learn recapped each session from the event and provided takeaways for attendees to take back to their companies.

Closing Lunch and Learn Session

Closing Lunch and Learn Session

Join us for next year’s forum in San Antonio, Texas from August 31 – September 2. Stay tuned for more details! Visit www.supplychainconsortium.com/Seminars/2015/overview.asp for more information.

 

Leave a comment

Insights into the FedEx Ground Ruling in California and Oregon

September 3, 2014

FedEx Ground Ruling By Lisa Kennedy
Project Manager, Tompkins International

It was inevitable. We knew a detailed look into how FedEx manages its drivers would happen, and it was only a matter of time before the courts would deem them employees. Uniforms, vehicle requirements, company logos, contractual requirements—who else could the contractors work for?

Logistics service providers who use independent contractors have been trying to distance themselves from FedEx to avoid the same fate. But I am an optimist. Those service providers that diligently allow independent contractors to be independent will remain intact; the future of home delivery will depend on it. In order for packages to be delivered to remote areas as cost effectively as possible, independent contractors who can consolidate packages from several different delivery service providers will need to do this.

Key differentiators for custom logistics service providers include:

  • Service providers need to offer custom logistics services with delivery as a component that is outsourced to an independent contractor to perform that part of the service. Independent contractors are free to work with multiple competing service providers.
  • Delivery vehicles are owned by the independent contractor and if they have a company logo the driver is reimbursed for advertising.
  • Independent contractors are allowed to subcontract their services to other drivers to assure deliveries are completed as required by the service provider.
  • Uniforms are never required by service providers. Safety and security attire may be required by the customer.

FedEx will need to take a hard look at how it manages its independent contractors. According to Wolf Research, “In the past, we were concerned that these class action suits could force FDX Ground to start using company employees with much higher costs. But even with this negative ruling, we no longer see risk that FDX Ground will be forced to move to an employee model.”

What other services can your company offer to customers to reaffirm your strategy as a custom logistics service provider and not just as a delivery company?

More Resources

Article: The Final Mile Delivery – Strategies, Benefits, and Challenges for Multichannel Fulfillment

Report: Trends in the Transportation Industry

Photo Credit: Justin Sullivan Getty Images

Leave a comment

What’s Happening with Alibaba: Profits Soar as IPO Nears

September 2, 2014

Alibaba initial public offering (IPO)By Jim Tompkins
CEO, Tompkins International

The Alibaba initial public offering (IPO) is just weeks away and things already look promising for the Chinese e-commerce giant. In a recent New York Times article, “Mobile Sales Lift Alibaba Profit Nearly Threefold, Ahead of I.P.O,” profit numbers for the last quarter have tripled to $2 billion, with sales jumping 45% to $2.5 billion.

The New York Times now says what I have been saying for the last 10 months—that the Alibaba IPO has the potential to be one of the biggest ever and that the offering could raise up to $20 billion. Alibaba’s financial success is a result of its increase in mobile capabilities, and thus, mobile sales. The article says that “nearly a third of Alibaba’s gross merchandise volume, or the value of goods sold on Alibaba’s marketplaces, comes from mobile transactions, compared with just 12 percent a year ago.”

This rings true to what I discuss in my video, The Alibaba Effect. Alibaba and its founder Jack Ma are changing the way supply chains are viewed and clearly Jack Ma will do whatever it takes to succeed.

As Alibaba’s numbers continue to climb, make sure you have watched The Alibaba Effect video and create your game plan. From the “get local” movement to e-commerce planning, you need a firm understanding of how to optimize your supply chain and e-commerce strategy in order to be successful as Alibaba’s IPO looms.

More Resources

Article: Alibaba Group Seeks Market Share

Video: The Alibaba Effect

Article: Alibaba: The New Face of American e-Retail?

Photo Credit: http://logonoid.com

Leave a comment

Confusion Reigns as the Question Persists: What Exactly Is Omnichannel?

August 27, 2014

Confusion Reigns as the Question Persists: What Exactly Is Omnichannel?

By Jim Tompkins
CEO, Tompkins International

I recently read a July 2014 report titled “On Solid Ground: Brick-and-Mortar Is the Foundation of Omnichannel Retailing.” While there are a few points in the report that show some understanding of omnichannel, I also disagree with many of the points it presents and believe it only adds to today’s confusion surrounding omnichannel.

Consider the following quotes from the report, as well as my thoughts:

  • “Digital retailing is capturing headlines and inspiring spirited debate as retailers plan how best to invest for future success. But beyond the headlines, physical stores remain the foundation of retailing, evidenced by the fact that 90 percent of all retail sales are transacted in stores.” This is simply untrue. Omnichannel means all channels work together to provide a great customer experience. Most customers use multiple channels to shop, so to credit the channel where the actual transaction takes place indicates a total lack of understanding of omnichannel.  In fact, where a sale is transacted has nothing to do with the importance of omnichannel. Think about it this way: If a customer finds an item that they like online and then goes to the store to buy it, is this an online sale? No. Is it an in-store sale? No. It is an omnichannel sale. Accounting systems that track where a sale takes place have nothing to do with the concept of omnichannel. Therefore, it is critical to identify the capabilities of your many segmented supply chains and enable them to achieve omnichannel sales potential at a minimal cost.
  •  “Physical Stores are clearly customers’ preferred shopping channel and a place where the most significant consumer and retailer value continues, and will continue, to be created.” This is also completely untrue. Place this in the context of the August 8, 2014 Wall Street Journal article “Shoppers Flee Physical Stores.” The opening sentence reads: “US retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online.”  Omnichannel is not about a competition between channels.  In fact, retailers need to realize that customers do not even think about channels. Channels are the retailers’ issue. Customers want to buy from you and use your various channels to support that purchase. Shopping is not about having a preferred channel—it is about finding the price, selection, experience, and convenience that fills your needs. Shopping must be omnichannel! Look at requirements of today’s final delivery to customers and you can see the major transformation that is occurring with same-day, next-day, second-day, and local delivery service providers. Innovation in final delivery is clearly being driven by the shopper fleeing the physical store and preferring alternative shopping channels.  This may lead to a need for retailers to be creative in driving traffic to the stores, but clearly how retailers make innovations in their delivery capabilities is the key to future growth.
  • “The store plays a crucial role in online purchases, as two-thirds of customer purchases online use a physical store before or after the transaction.” The whole point is that all channels work together for omnichannel success.  All channels are critical, and a strong channel management strategy is the answer to the success of retail.  Stores that support online are what omnichannel is all about. In a similar way, online helps stores: more than 60% of all retail purchases are influenced by online. But, this does not mean stores or online are the keys to success. This means that omnichannel holds the true key to success.
  •  The future of retail is solidly anchored in the brick-and-mortar channel.” Again, this is nonsense. If a portion of your channel management strategy is to have stores, then these stores will play a key role in your omnichannel strategy. But the future of retail is not in one channel or another, but in omnichannel.  Retailers that do not recognize this will not only operate with a channel strategy that is inflexible and unable to adapt to the rapid changes in customer preferences, but the supply chain will be a huge driver for escalating costs and act as a bottle neck to achieving best-in-class customer satisfaction.

When I first read the article, I was confused. But then a second, more careful read brought an answer: A short excerpt about the study reads: “This independent survey of consumers and retail executives was funded by, and completed in cooperation with, leading U.S. shopping mall real estate developers.” There you have it—so much for trying to make sense out of nonsense.

Photo Credit: Tim Reckmann

Leave a comment

Supply Chain Leadership Forum Hits High Point in 10th Year

August 25, 2014

Supply Chain Leadership Forum Hits High Point in 10th Year

 

By Jim Tompkins
CEO, Tompkins International

It’s finally here—the opening day of the annual Tompkins Supply Chain Leadership Forum.

I think that I’m more excited about this year than any other, and I certainly have some great reasons to feel this way today as I sit in Nashville pondering how far this event (and the field of supply chain in general) has come.

At the decade mark, the forum boasts some of the highest quality speakers and sessions available in the world, has greatly surpassed previous attendance records, and has evolved into the premier event for supply chain and logistics leaders. I could not be more proud of this 10-year-old!

The forum is where big ideas are created and lasting business relationships are made. It’s also where some of the brightest leaders in the industry come together and share best practices, key challenges, and recent discoveries.

I will be joining top supply chain leaders for a kick-off reception sponsored by JDA Software Group this evening, and then I’ll be presenting the opening keynote, Responding to the Alibaba Effect, tomorrow morning. (You can watch my video on this hot topic here, in case you missed it.)

If you’d like to get the latest Leadership Forum updates, follow us on Twitter (@jimtompkins) and use hashtag #SCLF2014. Don’t forget to connect with us on LinkedIn and follow us on Facebook too.

Here’s to an awesome event, and I can’t wait to get started!

More Resources

Top Highlights from 2013 Supply Chain Leadership Forum

2014 Session Topic Areas for Supply Chain Leadership Forum

Photo Credit: Elliott Billings

Leave a comment

Doubts About Alibaba and Jack Ma? Find Out Why the Critics Are Mistaken

August 18, 2014

By Jim Tompkins
CEO, Tompkins International

Jack Ma

Jack Ma, Alibaba founder

I was fascinated this past week when it was reported by the The New York Times (among others) that “Doubt is Cast on Vetting of Deals by Alibaba.”

As everyone knows, I am a keen student and researcher of Alibaba. In my recent video, The Alibaba Effect, I discuss not only the amazing story of the e-commerce giant—nearing its announced IPO in just a few weeks in the U.S.—but I also comment on the intelligence, entrepreneurship, foresight, and risk-taking of its renowned leader, Jack Ma.

The newspaper reported, essentially, that Alibaba has been on a buying spree since 2013, spending billions to acquire stakes in businesses such as department stores and mapping services in China, as well an array of technology start-ups in the U.S. In addition, the article indicates that its recent acquisition control of a Hong Kong film company just two months ago (now called Alibaba Pictures Group) might not have been “fully vetted,” and that “possible non-compliant accounting issues” have since been discovered.

The article further asserts (via “experts”) that “Alibaba has little expertise in many of the new businesses,” which means that it has to rely on incumbent managers in business decisions; and, that “Alibaba, like most Chinese companies, does not have the ability to manage the increasing number of unfamiliar yet decentralized divisions and people.”

I find these assertions fascinating because the so-called “experts” are most often those who do not take risks, do not experiment, and do not learn by doing.  Jack Ma has been pushing the envelope, out-learning them, and moving forward with a speed unheard of by Western analysts. He has a great vision, is on a path to learn rapidly, and is following that with passion.

Whether or not a financial or accounting detail was missed by his highly qualified advisors is not the point, and it is certainly not any criticism to be considered in the soon to be conducted IPO.

Interestingly, the critics have also recently reported certain structural weaknesses or irregularities in Jack Ma’s corporate organization. Amazingly, he acted within a week to adjust these to provide more clarity and transparency, as well as reorganize them to meet more “commonly accepted standards.”

Jack Ma has publically discussed his goal of growing a major global business for the long term, while moving quickly to build his presence in the short term. As I discuss in some depth in The Alibaba Effect, he is doing just that. The ramifications for any business in the world are significant, and we are encouraging, and working with, many companies to prepare for and take full advantage of these effects.

As Alibaba’s founder follows this rapid roadmap, he is quickly learning about different industries—e-commerce, Internet and store retail, banking, Internet video, mapping services, microblogging, web browsers, and now entertainment, as well as learning more and more about different countries and cultures.

I very much doubt this fast-paced “study, acquire, learn, and profit model” will slow down, either before or after the IPO. He is taking calculated risks to apply this model and turning it into a big advantage.

Others can criticize and use old-school criteria to find faults, but Alibaba and Jack Ma are changing the world while the debates persist. As some wise people have stated before, “Either get on the fast-moving train or get out of the way.” And as the video conveys, smart companies will prepare now for the growth and profit ride.

What are your thoughts on Alibaba’s fast track towards success? How are you preparing to compete?

 

More Resources

Article: Alibaba Group Seeks Market Share

Blog Post: Flipkart: A Threat to Alibaba? Not Really

Article: Alibaba: The New Face of American e-Retail?

Photo Credit: World Economic Forum

Leave a comment

Five Major Changes Happening Right Now in Industrial Distribution

August 13, 2014

By Jim Tompkins
CEO, Tompkins International

Big things are happening in today’s industrial distribution landscape—five big Bolts
things, to be exact. And they are causing an uproar in the industry as they all occur simultaneously. The five big changes happening now are:

1. Experience
2. Convenience
3. Selection
4. Price
5. Competition

Let’s take a closer look at experience. This means everything from real-time product availability and enhanced search, to improved product descriptions and streamlined checkout. Experience also includes mobile, order history, personalization, workflow management system, and free shipping and returns.

In terms of convenience, today’s speed of delivery is “getting local.” This is evolving rapidly as industrial distribution consolidation continues to pick up pace, and it is also fueled by both eager sellers and eager buyers. Multipliers are high and both financial and strategic buyers have the available funds to invest. As a result, this consolidation is in more physical locations closer to their customers, and therefore available for delivery.

Today’s customers demand a selection that has broader variety and depth of product offerings. This can be done through mergers and acquisitions (M&A). By buying distributors who offer different products and then integrating these distributorships, you are able to offer a larger selection of products to both your customers and the customers from the firm you acquired. Many customers want to buy from fewer distributors, so M&A not only offers customers a wider selection, but also results in increased revenues.

Another way to increase selection is by acting as a marketplace. You can do this by offering products for which you do not stock inventory, but rather pass the order onto your marketplace partner who drop- ships the product to your marketplace customers. This stockless production can literally allow you to offer an “endless aisle” of product offerings without increasing inventory.

Of course, price is always an important factor. Again, this is a potential benefit of M&A. By broadening your selection, you are able to sell more products to each customer (and thus have larger orders). By having larger orders, you can create more efficient operations and reduce final delivery costs. This results in lower prices passed on to your customers.

Another price reduction avenue is to cut out your supplier and go directly to the source and offer your clients private label. This can often not only result in reduced selling price, but also bring increased margins and brand loyalty.

Finally, you have to work in a competitive environment to change the landscape of the industry. Since other distributors are addressing the above five changes, you need to as well. They are improving experience and convenience for your customers, and they are selling a broader selection of products at a reduced price.

To maintain your position in the marketplace, make a strong stand on these five fronts. In addition, there are new competitors you need to understand:

  • Product manufacturers who create their own website for MRO components that includes extensive knowledge considered a unique selling position by distributors. Your customers would go direct to these manufacturers and cut the distribution link out of the supply chain.
  • Product manufacturers who list on marketplaces and sell directly to your former customers for MRO. To grasp the potentially largest threat going forward on this topic, understand the positioning of e-marketplace Alibaba. Learn more about what Alibaba means for your company in my video, The Alibaba Effect. You won’t want to miss it.
  • Pure online B2B players who sell products to your customers.

You can’t stay where you are and expect to be successful. You must make substantial improvements in experience, convenience, selection, price, and competition. Industrial distribution is experiencing a huge transformation—and so must you.

 

More Resources

Video: The Alibaba Effect

Blog Post: Flipkart: A Threat to Alibaba? Not Really

Blog Post: The ‘Risky Business’ of Supply Chains

Leave a comment

Flipkart: A Threat to Alibaba? Not Really

August 4, 2014

By Jim Tompkins

FishIndian e-commerce site Flipkart made a loud splash last week when they raised $1 billion in fresh funds. Obviously, this was done in preparation for competing with giant online retailers already well-established as big fish in this pond.

Flipkart is India’s largest e-commerce company, so the announcement was big news. But as I explain in my latest video The Alibaba Effect, Alibaba is so well-positioned with funding, advanced technology, logistics, customer service, and marketing that Flipkart is no threat to the Chinese e-commerce marketplace titan.

It’s All in the Numbers

Consider their shipping volumes over the past 12 months—Alibaba shipped 5 billion units and Flipkart did 60 million. I truly believe that Flipkart will not be the big player that many are projecting, and they will be limited in their global reach. This also seems clear when we compare last year’s network users for each company: 231 million people in China used Alibaba, while Flipkart reported only 22 million network users in India.

As for products sold, check this out: 1 billion unique items sold by Alibaba versus 15 million unique items sold by Flipkart.

Now, let’s compare the two companies’ progress on sales and on IPO prospects. *

Alibaba.Flipkart table

*All data and numbers are from publicly available information

Yes, analysts expect e-commerce to take off in India as its population gains more disposable income, but China is already the fastest growing consumer market in the world. So the bigger e-commerce story here, hands down, is Alibaba and its brilliant founder Jack Ma.Yes, analysts expect e-commerce to take off in India as its population gains more disposable income, but China is already the fastest growing consumer market in the world. So the bigger e-commerce story here, hands down, is Alibaba and its brilliant founder Jack Ma.

What are your thoughts on recent developments in the e-commerce global marketplace? Do you think that Flipkart has any chance of swimming with the big fish?

 

More Resources

Blog Post: The Final Delivery Game: Ship from Store, In-Store Pickup, or Lockers? 

Video: The Alibaba Effect

Article: Final Delivery—Shop. Select. Deliver

% Comments

The ‘Risky Business’ of Supply Chains

July 29, 2014

By Tompkins International Staff

Risk report front pageWhen some of us hear the words risky business, we might think of Tom Cruise’s infamous movie (tube socks sliding across the floor and all).

But there is risky business to think about with supply chains too, and it’s a subject that supply chain leaders aren’t talking about enough these days. Managing risks and recovery is a critical element of your supply chain planning.

Our new report, Risk Management and Recovery, peels back the layers to today’s greatest supply chain risks, mitigation strategies, and recovery plans. The report is based on a March 2014 survey by Tompkins Supply Chain Consortium, so it guarantees a realistic perspective into what current companies are really doing and thinking.

Interestingly, the survey reveals that today’s top external sources of risk are: market changes, raw material availability/commodity price fluctuation, and weather/natural disaster disruption. Specialized skill sets/employee expertise is the greatest supply chain risk to current operations, according to those surveyed.

Download the report for further insights into this topic, including a time-to-recover questionnaire and a risk assessment. Do you agree with the top sources of risk? What are you seeing as the top risks at your organization and what is your recovery plan?

 

More Resources

Supply Chaincast Global Trade and Risk Management: Capturing the Business Value

White Paper Demand-Driven Value Networks: Beyond Lead Time and Cost Reduction to Integrated Management of Risk and Compliance

Blog Post What Are You Doing to Manage Global Trade Risks?

Leave a comment
  • Subscribe to the Blog

  • More About Jim Tompkins

    Founder of the Blog

  • View recent posts

  • LinkedInTwitterEmailTumblrFacebookShare
  • All of the information in this blog is the result of Tompkins International's research of public information. There is no information presented that comes from any proprietary source. Tompkins International does not discuss information about their clients unless that information has been published.